If you are way past the “I’m-going-to-be-in-debt” struggle and often find yourself in “I’m-in-debt” kind of situation, you might be thinking about how badly it can affect your credit record. People who are in debt oftentimes lose hope and think there’s no way out. Being in debt is indeed a steep climb, but a climb nonetheless. It means there’s a peak you can reach eventually.
Getting yourself out of debt is not only possible, it’s completely realistic and should become your priority. However, it won’t be a walk in the park. You need to have that determination, and you must be willing to make a few sacrifices on your finances. Fortunately, there are ways that can help you manage your finances more efficiently.
The Three Pillars of Being Free From Debt
Borrowing money. Taking a loan. Overusing credit cards. Mismanaged expenses. Spending beyond your means. These are just few of the many ways to sink yourself deep in debt. Being in debt may be an easy way to cover up your finances, but it is not really a solution if you have financial problems.
If you don’t take your debts seriously and not manage them properly, they might become extremely difficult to deal with. When it comes to freeing yourself from debts, there are essentially three important steps you need to keep in mind. However, these strategies may yield varied results based on personal circumstances.
1. Have A Plan
The first important thing that you must do is to create a strategic plan. Make a list of strategies to clear your debt in a timely fashion. One of the biggest mistakes that people often make is that they tend to overlook some of their payables, and this can cause them to be charged with late payment penalties and higher interest rates.
In order to make sure that you do not leave anything out, you should make a list of every single debt that you must repay, including their corresponding due dates. Include loans with big and small amounts, long-term loans, short-term loans, and even those which you borrowed from friends or family.
The more debts you have, the worse your credit score will become. People with bad credit may find it difficult to get a loan in the future. Even the smallest debt can leave a dent in your credit score, so it’s important to clear all your obligations.
2. Take One Step At A Time
Those people who have managed to get out of debt have done so successfully through taking one step at a time. If you have multiple debts to pay and multiple entities to please, you shouldn’t get bogged down in trying to handle them all at once. Instead, you should try to solve one piece of the puzzle at a time.
On the other hand, if you want to get rid of the multiple obligations and just manage a single loan, you have the option to consolidate your debt. Debt consolidation is a good way to keep your financial liabilities on track.
However, if you are thinking about the difficulties of getting a loan to consolidate all your existing debts, you should know more about the many benefits of guarantor loans. A guarantor loan may allow people with poor or bad credit to get approved, with much lower interest rates compared to other bad credit loans.
3. Increase Your Financial Resources and Reduce Expenses
Though it seems easier said than done, the most important and helpful thing to do is to manage your finances efficiently. Review your fixed and variable day-to-day and monthly expenses and see where you can reduce them. Cut off costs on the less important things, such as luxurious hobbies and expensive treats.
Also, find ways on how to increase your income so you can pay off your existing liabilities faster. If you have a special skill or a means through which you can bring more money into the fold, you should use them to generate more income. Consider a second job or a sideline business, as long as it helps you pay the bills.
Stay Out Of Debt
All it takes is a little (or a lot of) sacrifice to settle all your financial obligations and finally free yourself from debts. However, paying off your liabilities is just one of the many steps to finally rid yourself of being in debt. The most important thing is to stay out of debt.
Managing your finances wisely and keeping your cash flow in check all the time are few of the effective methods to ensure that you don’t fall in the same debt trap once again. More importantly, it takes a lot of perseverance and a few lifestyle changes in order to successfully accomplish this.
